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The ins and outs of mortgage debt during the housing boom and bust

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  • Neil Bhutta

Abstract

From 1999 to 2013, U.S. mortgage debt doubled and then contracted sharply. Our understanding of the factors driving this volatility in the stock of debt is hampered by a lack of data on mortgage flows. Using comprehensive, individual-level panel data on consumer liabilities, I estimate detailed mortgage inflows and outflows. During the boom, inflows from real estate investors tripled, far outpacing growth from other segments such as first-time homebuyers. During the bust, although defaults and deleveraging are popular explanations for the debt decline, a collapse in inflows has been the major driver. Inflow declines across counties have been associated not just with house price declines, but also with rising unemployment and higher minority population shares. Finally, inflow declines reflect, in part, a dramatic decline in first-time homebuying. First-time homebuying fell among both high and low credit score individuals, but much more precipitously for low score individuals. Further analysis suggests that the differential decline by credit score likely reflects markedly tightened credit supply.

Suggested Citation

  • Neil Bhutta, 2014. "The ins and outs of mortgage debt during the housing boom and bust," Finance and Economics Discussion Series 2014-91, Board of Governors of the Federal Reserve System (U.S.), revised 23 Jul 2014.
  • Handle: RePEc:fip:fedgfe:2014-91
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    Cited by:

    1. Kerwin Kofi Charles & Erik Hurst & Matthew J. Notowidigdo, 2018. "Housing Booms and Busts, Labor Market Opportunities, and College Attendance," American Economic Review, American Economic Association, vol. 108(10), pages 2947-2994, October.

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    Keywords

    credit supply; first-time homebuyer; mortgage default; Mortgage debt;

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